Exhibit 21.9 Use the Information Below for the Following Problem(S)

question 85

Multiple Choice

Exhibit 21.9
Use the Information Below for the Following Problem(S)
As a portfolio manager, you are responsible for a $150 million portfolio, 90 percent of which is invested in equities, with a portfolio beta of 1.25. You are utilizing the S&P 500 as your passive benchmark. Currently the S&P 500 is valued at 1202. The value of the S&P 500 futures contract is equal to $250 times the value of the index. The beta of the futures contract is 1.0.
-Refer to Exhibit 21.9.How many contracts should you buy or sell in order to increase the portfolio beta to 1.30 (rounded to the nearest integer) ?

• A) Sell 70 contracts
• B) Buy 70 contracts
• C) Buy 87 contracts
• D) Buy 98 contracts
• E) None of the above

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Definitions:

Possibility

The potential for something to happen or exist in the future, often evaluated in risk assessment and project planning.

Identifying Risk

The process of finding, recognizing, and describing risks that could affect the outcome of a project or business operation.

Alternative Method

A different approach or technique used to achieve a goal, often considered when traditional methods are ineffective.

Risk Event

A specific occurrence that can affect the outcome of a project either positively or negatively.